SECURITIES AND EXCHANGE BOARD OF INDIA
Part – 2
The Indian Financial market is trusted globally in the context of transparency, investors, intermediaries, and safety for security issuers. The credit goes to the supervision of well-structured and bye-law operating regulatory authority known as Securities and Exchange Board of India (SEBI). Let’s look at the concept of SEBI. Here:
REASON FOR ESTABLISHMENT OF SEBI
Somewhere around the 1970s and 1980s, the capital market was emerging as the new sensation amongst the individuals of India. Many frauds started taking place such as unofficial private placements, unofficial self-styled merchant bankers, non-adherence of provisions of the Companies Act, the rigging of prices, delay in delivery of shares, violation of rules and regulations, etc. Due to these reasons, people started losing confidence and faith in the stock market. Thus, the government urged a need to set-up an authority that can regulate the working on these frauds. Finally, the Government came up with ‘SEBI’.
ROLE AND PURPOSE OF SEBI
- Issuers of Securities: These are corporate entities that raise funds from the financial market. SEBI ensures that they get a healthy environment and transparency for their needs.
- Financial Intermediaries: Here, they act as a mediator in the financial market, thus, bringing safety and smoothness in financial transactions.
- Investor: The ones who keep the financial market engaging and alive. Also, ensuring that investors don’t fall prey to any fraud or manipulation in the market.
POWERS OF SEBI
- To regulate & approve by-laws of stock exchanges
- Handling the registration of brokers
- Inspecting the books of financial intermediaries
- Compelling certain companies to get listed on one/more than one stock exchanges
- Calling for periodical returns and inspecting the books of accounts of recognized stock exchanges
FUNCTIONS OF SEBI
Categorized into three parts. Here:
- Prohibits Insider Trading: Insider trading is the buying and selling of securities by the insiders like promoters, employees, or directors of the company, having access to confidential information or price that affects the securities. In order to avoid insider trading, SEBI has locked employee welfare schemes and Trusts of listed companies from purchasing their own shares from secondary markets.
- Price Rigging: It refers to malpractices which is related to securities, with the objective of causing unnatural fluctuations in the price of securities by increasing/decreasing the market price of stocks leading to huge losses for traders or investors. SEBI is strict enough to prevent price riggings.
- Fair Trade Practices: SEBI prohibits unfair trade practices and frauds of securities by establishing a code of conduct and regulations in the securities market.
- Financial Education: SEBI conducts offline and online seminars that help investors get insights on the money management and financial market.
- Introducing an electronic platform for financial market
- Introducing discount brokerage
- DEMAT form of securities
- IPO – permitted through the exchange
- Training for financial intermediaries
- Buying/selling of mutual funds directly from AMC through a broker
- SEBI has designed a code of conduct and guidelines that are enforced to corporates and financial intermediaries.
- SEBI registers as well as regulates the functioning of mutual funds.
- Conducting an audit of exchanges and inquiries.
- Regulating the takeover of companies
- SEBI registers all share transfer agents, trustees, intermediaries and everything associated with the stock exchange.